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tv   Whatd You Miss  Bloomberg  August 12, 2015 5:30pm-6:01pm EDT

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joe: we are moments away from the closing bell. i'm joe weisenthal. scarlet: i'm scarlet fu in for alix steel. ♪ scarlet: u.s. stocks rebounding. with the dow wiping out a decline, but not closing in the positive after opening for losses in the second day following china's currency valuation. joe: this is "what'd you miss." chinese chaos -- is china making the right move? scarlet: what about -- will the
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rise of a left-wing party make britain the new greece? joe: we discussed this and more with our guest who will be joining us live from london. scartlet: we begin with the markets. all three indexes have finished closed in the green right now. the dow is up one point. stocks rebounding, bonds paring their losses as the china concern eases. the dow touching a low before recovering. at one point, it was down 277 points. for the s&p 500 this will be the , biggest reversal since may of 2012. joe: it was an extraordinary day. starting last night when the chinese yen weakened further. that sent ripple affects. futures immediately fell. european shares got slammed. then of course u.s. stocks down big in the middle of the day and
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then a stunning afternoon recovery. a very rare thing to see it come back like that. scartlet: you don't always see that. joe: i want to go in my terminal. here is one thing that did not bounce back today and that was commodities. right around here, we have a chart of soybeans and corn. the white is corn. the gold is sold beans -- soybeans. i should have switched that around. at 12:00 we got usda report. that said both of those plundering. it is a world commodity story. every commodities seems to be there is more supply. milk, oil, zinc. now corn and soy, everywhere you look we are swimming in commodities. scartlet: there is too much of everything. a lot of people point to low oil prices as the reason why because it makes it easier to grow all this and produce more of it. joe: the downside of the super cycle is upon us. scartlet: look at a divergence between u.s. equities and credit.
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thanks to peter for this chart. the red line is corporate bonds. the yellow line is the mix -- vix. the two moved in a similar pattern basically last saturn through this spring. starting in march they moved in different directions. spreads have widened. also the effects of the debt problems of puerto rico. it has been modest in terms of movement overall. you have an upward swing today. will the market shrug things off like it did in july or is this the beginning of the end of the divergence? joe: this is a big story. this tension between credit and stocks and everybody is wondering which way it will result. i want to bring in our guest to joining us from london, a member of the u.k. house of lords. thank you for joining us. the big story in world markets
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in the world economy are the moves china is making. is china making the right moves? is china a poster child for when -- what happens when a government tries to control the economy too hard? guest: i think people have been talking about the possibility of currency war for a number of years. it may be that we are starting to see a reality. the problem with china, its export growth model is busted. that relied on currency depreciation and pricing of currency being too low. they can't keep that up forever. they've got to find a new growth model. that is what lies behind these currency swings. and each side accusing the other of ms. pricing its currency.
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pricing -- mispricing its currency. scartlet: i want to go there. china is trying to transition to one that is more domestic demand driven. does it have mechanisms in place to make that transition to an economy more market-driven and open to international participation within its command economy structure? robert: no. it's got to gradually dismantle it. particularly to slow down investment in its lossmaking heavy industries. everyone agrees it has got to rebalance towards consumption but that is difficult given the structure of the chinese economy and the interim solution is to try and rebalance towards eurasia. that is the meaning of the new silk road policy which it has concocted in the last two or three months. it has become more and more public. that it hopes to do in conjunction with russia.
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scartlet: we have a quote from one of your essays about that china-russia marriage. china's motive is clear. the growth model is running out of steam. stagnation threatens the west. the company by protectionism and sentiment, does that reinforce or jeopardize the wisdom of this arrangement or in store marriage of convenience? robert: the chinese don't think in terms of second by second fluctuations of the market. one of the things about china is their leaders are very old. that is a principle of chinese policy. you take long views. they think of this as a 50-year-old program. i don't think they are going to be too worried about day-to-day fluctuations.
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volatility does suggest they have to start moving. joe: in the last couple days since the turmoil, we have seen the fed hike rate diminished. when you look at the global economy, do you think the fed should be in an urgency to get on with the heightening cycle or should it wait a while? robert: it depends on your view of what is going to happen to inflation. the central banks have inflation targets and they are meant to move interest rates in line with what they expect the inflation to be over the medium-term. i don't think there are strong inflation pressures anywhere.
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the pressures are the other way around. i don't really seeing there is a great pressure to raise rates. i don't think it in economic terms a raise of policy rates is the right thing to do just now. joe: you will stay with us and now we have breaking news. scartlet: we have cisco numbers here. earnings per share beating estimates -- $.59 for the fiscal fourth quarter. the consensus was for $.56. revenue rose 4% which was higher or more than what analysts were looking for. they were anticipating a 2% increase. in terms of the forecast, it is in line with what analysts were 56% -- for on average -- a consensus was what was $.56, anticipated. higher than what analysts had been looking for. $9.82 billion. cisco shares moving higher in the premarket in response. coming up, we have a chart you
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can't miss on emerging market government and corporate debt. potentially at an inflection point with the fed ready to move. ♪
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scarlet: i am scarlet fu. joe: i'm joe weisenthal. before the break we told you about a chart on how corporate debt is affected by the fed. scartlet: after 2013 funds flowed into sovereigns. they eventually turned internet out -- into that outflows. for an money is going into emerging market corporate. you wonder if the trend will reverse. joe: with the dollar strengthening there will be concerns about debt service payments. scarlet: that is why we are seeing such steep stall as.
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-- stall outs. let's get to the top headlines this afternoon. alibaba planning a stock buyback to prop up its share price. the stock traded lower after sales slowed down and revenues missed targets. the transaction volumes disappointed analysts. alibaba blaming the chinese slowing economy. joe: kraft and heinz announced the elimination of 2500 jobs in north america, 5% of the combined workforce. the merger was driven by berkshire hathaway and 3g capital of brazil. scartlet: another one step forward, one step backward in the greek debt crisis. there is a technical agreement on the bailout. $95 billion germany's government withholding approval of the plan. the payment to the ecb is due in just a few days and those are your top headlines. i want to bring back in lord
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robert who wrote about greece. you took aim at the term confidence fairy. you said austerity in a slump does not work. asserting that the confidence fairy does not change the logic of the policy. it scares -- obscures the logic for a time. recovery may come about but never because of it. given that, you are a critic of update us -- austerity. update us on the status of greece and what germany is doing wrong. robert: i think what they are doing wrong is they are forcing the greek economy into greater and greater depression as the price for getting the bailout. greece will get more money. it will be able to go on paying interest on its debt but at the
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cost of driving the economy into greater recession. that is a self-defeating circle. the greek economy has fallen by 25% in the last five years. it is projected to go and get smaller by 5% this year. what are they trying to do? they are really cutting off the real basis of servicing the debt. meanwhile, they are increasing the debt so it cannot work. joe: has europe forgotten the lessons of post-world war ii? there were a lot of people talking about germany and the fact that they were supposed to get debt relief and that helped europe and that should have applied to greece as well? what is the historical lesson here? robert: the historical lesson, the settlement between debtors and creditors has always got to be negotiated.
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there are creditor responsibilities, and the creditors cannot just expect to be paid by granting the economy of the debtors into dust. what we haven't had enough of in this particular negotiation is the recognition by the creditor, the chief creditor which is germany it has to play a big , part in the adjustment of the greek debt. as long as it doesn't understand that, not only is greece not going to recover but europe is not going to recover and it will hit germany as well. scartlet: jeremy corbin is either resuscitating or destroying the labour party depending on your perspective. he is polling well. 53% versus the runner up and his 21%. when jeremy corbin be good for the u.k. economy? robert: everyone, i think there
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are two questions on whether he would be good for the labour party, and whether he would be good for the economy. which can be separated. everyone thinks he is lefty ian and almost a communist. there is one sensible thing he is saying, which ought to be taken fairly seriously. which is about the monetary financing of an investment program. if for one reason or another, you can't do that through orthodox monetary policy or fiscal policy, why not borrow from the the bank? in order to fund an investment program? it can only be the case under very special circumstances. it would have to be in deflationary circumstances. i think the idea that this is mad because it will lead to runaway inflation is wrong under
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these circumstances. it is something worth considering. that bit is anti-austerity, it has reasonable credentials behind it, well-known people have backed it and not to be considered, and not written off as a reversion into old-styled socialism. joe: he has proposed this idea of qe. aggressive monetary financing of investment. the bank of england creating money to invest. is that a proposal you believe would have been supported? robert i don't know. : i don't think he would have rejected it out of hand. he would have given it serious concern. in the circumstances we actually find ourselves. why not, you might say. borrowing ando on
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set up an investment bank if you like? and which can issue bonds for a particular project. that would be one possible way of doing it. i think behind it is not so much how you finance it but trying to get an investment program going at a time where there is large surplus of savings. and the economy is not very helpfully -- healthily recovering. joe: how worried are you about brexit? there is a referendum about the u.k. possibly leaving the eu. how do you feel about it? robert it can't be ruled out. : i think in the last two or three years, since the crisis really started, the european union hasn't covered itself in glory. i think the eurozone itself has
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been pretty much a disaster. that means there is a lot of anti-eu mood in britain. with the rise of ukip and the general turbulence on the continent of europe there will be an anti-european sentiment. i don't rule out a referendum going against staying in the eu. scarlet: not ruling out a possible brexit. we will have more with him. joe: coming up, a question for the man who wrote the book about keynes. what would keynes do? ♪
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joe: with us still is lord robert, a member of the u.k. house of lords and well-known biographer of john maynard keynes. as a recently said, as robots continue to take labor humans on , the income to replace wages from work. tax credits point in the direction of inflation income. could you explain why this is something we should support? robert: first of all, why even think of it? i think it is how you deal with a challenge of disappearing jobs. if you think that robots and automated systems are going to make deeper and deeper inroads into human work, you have to start thinking not so much of
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replacement jobs as replacement incomes. an unconditional basic income. that is an income not tied to the job market, seems to be the logical way forward. i think it marks a recognition that work work is going to be a diminishing part of people's lives in the next 20 or 30 years. and a diminishing part of their identity. therefore you have to create , some opportunity for them to reshape their pattern of living. that is the basic idea behind it. scarlet: work a less important part of my lives? never? robert: never in america. scarlet: that is right. what should living wage be? how would you quantify the living income in a developed economy? guest: there are basic measures for what is called the living wage, or living income.
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it is about half of median income. that is the accepted standard. that is where you need to start. this is a long-term thing. for many years to come, most people's lives are going to be defined by work. there are studies that are showing up to 50% of jobs are at risk over the next 20 years. the question is are we going to find enough replacement jobs for the jobs that automation and robotics are threatening? i don't know what the answer to that is. people take different views but we ought to be thinking about it , thinking about what the human race in developed countries is going to do when jobs are less important part of their lives.
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joe: let's look big picture. you look at what policymakers in the u.s. and europe are doing. keyne's biggest disappointment be now but how -- by how policymakers are addressing the economy? robert: he would have been disappointed at two things. lack of precautions taken against the possibility of a huge financial crash which happened in 2008, 2009. secondly, lack of buoyant response to that crash. which means the recovery has been very slow. we have been in a state of semi-stagnation and the recovery is still very weak in the european union. the actual recovery measures we have taken, quantitative easing, have skewed towards asset buying and real estate.
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thus threatening to get and , re-create the circumstances that have led to the crash in the first place. i think he would have been disappointed by those policy failures. joe: what is the number one economic issue that keeps you up at night? robert: i don't think i worry too much about the world economy. i feel like i can sleep well with that. what keeps me up is worrying about the things i would do and don't have the time to do. that worries me a lot. joe: all right. robert, member of the u.k. house of lords and professor, thank you so much for the fascinating conversation. scartlet: we will be right back. ♪
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scarlet: retail sales are due out tomorrow. cost-cutting and profits missing estimates at macy's. that is because of discounted. people really need to be spending in order to get us the growth that enables the fed to move ahead. joe: and initial jobless claims. this number has been low. virtually nobody is getting laid off in this economy. it would be amazing to see how
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long the streak can continue. scartlet: that is all for "what'd you miss." joe: have a great afternoon. ♪
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>> from our studios in new york city, this is "charlie rose." charlie: we begin with a conversation about technology. google and us yesterday he would reorganize as a holding company, the purpose of the new structure is to increase management dale and focus on its consolidated businesses. search, youtube, droid, and other internet products will be run by [indiscernible] will become the ceo of google incorporated. the other products will be managed separately, including google's investment arms, life science venture, and lab, google x,

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